CEE MARKETS-Leu in focus on fears that president might reject PM candidate

Reuters Staff

8 Min Read

* Leu approached record low on fears of political crisis
* Romanian president seen deciding PM candidate Wedsnesday
* Czech govt resigns, crown trades steady
By Sandor Peto
BUDAPEST, Jan 17 (Reuters) - The leu edged down towards a
record low again on Wednesday over concerns that the move by
Romania's ruling Social Democrat Party (PSD) to sack its second
prime minister since an election 13 months ago may lead to a
crisis.
The leu had approached the record low, set on Dec 29 at 4.68
against the euro, after Mihai Tudose was dismissed as prime
minister on Monday.
Pressure on Romanian assets eased as the party moved quickly
to find a replacement. But now it is up to President Klaus
Iohannis, a bitter critic of the government, to accepts or
reject European Parliament lawmaker Viorica Dancila.
"There is a material risk that the president would ask PSD
for a different nomination for PM (prime minister)," ING
analysts said in a note.
"The market will keep a close eye on the political
developments for direction," they said.
The leu dipped 0.05 percent to 4.658 against the
euro by 0911 GMT, off Tuesday's lows of 4.6604.
On Tuesday, the currency got support from Romanian central
bank Deputy Governor Liviu Voinea who said it was very close to
the level suggested by economic fundamentals.
The Czech crown, after testing its strongest
levels since 2013 on Tuesday, traded steady at 25.44, even
though the minority government of Andrej Babis resigned on
Wednesday after losing a confidence vote in parliament on
Tuesday.
Political developments rarely influence the markets of the
fast-growing and stable Czech economy.
The government will stay in power in a caretaker capacity.
Babis must cut a deal with the opposition if he wants to prevent
an early election.
Czech central banker Vojtech Benda had buoyed the local
currency, saying on Tuesday that inflation trends can allow
faster interest rate rises.
The government is expected to sell the bonds offered at its
auctions on Monday, even though the amount was doubled early
this week.
"But incoming supply in next months (is) likely to force the
bidders to be careful in overpaying today," Komercni Banka said
in a note.
Polish central banker Grazyna Ancyparowicz told Radio Wnet
that interest rates in Poland would most likely be close to
current level throughout 2018.
December Polish corporate sector wage figures due at 1300
GMT are seen showing continuing robust growth, but that is not
expected to change the central bank's stance.
A report by the Puls Biznesu daily that the government was
working on launching a cryptocurrency, was unlikely to upset
zloty markets.
"We are clearly set to see more of this in future, but there
is a clear difference between all the virtual currencies out
there and something that is regulated and tied to the official
currency," said Simon Quijano-Evans, strategist of Legal &
General Investment Management.
CEE SNAPSHOT AT
MARKETS 1011 CET
CURRENCI
ES
Latest Previous Daily Change
bid close change in 2018
Czech <EURCZK= 25.4400 25.4450 +0.02% +0.40%
crown >
Hungary <EURHUF= 309.1500 308.7800 -0.12% +0.57%
forint >
Polish <EURPLN= 4.1710 4.1709 -0.00% +0.13%
zloty >
Romanian <EURRON= 4.6580 4.6556 -0.05% +0.47%
leu >
Croatian <EURHRK= 7.4200 7.4225 +0.03% +0.14%
kuna >
Serbian <EURRSD= 118.3000 118.4000 +0.08% +0.17%
dinar >
Note: calculated from 1800 CET
daily
change
Latest Previous Daily Change
close change in 2018
Prague 1111.79 1114.920 -0.28% +3.12%
0
Budapest 39619.97 39684.16 -0.16% +0.62%
Warsaw 2594.44 2591.10 +0.13% +5.41%
Bucharest 8249.14 8233.13 +0.19% +6.39%
Ljubljana <.SBITOP 823.76 822.05 +0.21% +2.16%
>
Zagreb 1879.86 1879.60 +0.01% +2.01%
Belgrade <.BELEX1 771.77 774.65 -0.37% +1.58%
5>
Sofia 712.41 715.40 -0.42% +5.16%
BONDS
Yield Yield Spread Daily
(bid) change vs Bund change
in
Czech spread
Republic
2-year <CZ2YT=R 0.7040 0.0720 +128bps +7bps
R>
5-year <CZ5YT=R 1.0070 0.0220 +114bps +3bps
R>
10-year <CZ10YT= 1.7610 0.0200 +121bps +3bps
RR>
Poland
2-year <PL2YT=R 1.5980 0.0060 +217bps +1bps
R>
5-year <PL5YT=R 2.6110 0.0140 +274bps +2bps
R>
10-year <PL10YT= 3.2980 0.0220 +274bps +3bps
RR>
FORWARD RATE AGREEMEN
T
3x6 6x9 9x12 3M
interban
k
Czech Rep 1.04 1.21 1.36 0.76
<PRIBOR=
>
Hungary 0.11 0.18 0.25 0.02
Poland 1.75 1.78 1.86 1.72
Note: FRA are for ask prices
quotes
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(Additional reporting by Bucharest newsroom and Jason Hovet
from Prague; Editing by Alison Williams)